Why would one be declined for mortgage protection cover?
Mortgage protection is the first type of life insurance most of us buy as it is a necessary requirement when you buy your house and the bank give you your mortgage loan. It is very straightforward and it is typically inexpensive as it is life insurance that decreases as your mortgage loan reduces over time. With the Irish property market in expansive mode mortgages and mortgage protection sales are strong which is music to the ears of the life companies that sell this cover mainly via independent brokers and also via the banks.
Most people get their mortgage protection insurance very easily with over 90% of applicants getting accepted straight away and with some companies the acceptance rate is even higher. For example, Aviva decline less than 2.5% of mortgage protection applications whilst Royal London decline less than 2%. Moreover, just because one life company decline your application does not mean they all will and any good independent broker like Low.ie, will shop around for you among all the other life companies to see if your cover can be obtained. This is a key reason in not restricting oneself to the banks who only deal with one life company (all the banks, bar Bank of Ireland deal solely with Irish Life. Bank of Ireland deal only with NEW Ireland which they own outright). It is also worth remembering that life companies, like all companies, hate declining business so they will always strive to offer terms.
Each insurance company has its own appetite for certain risks and its own pricing structure and brokers will know this so they are able to steer any applications that there may be certain issues with, to the life company they believe is best placed to underwrite it. With five companies operating in the Irish market there is plenty of choices too.
The most common reason for being declined for mortgage protection is the disclosure of a health or lifestyle condition on the application form. Whilst most conditions can be priced and accepted by the life companies they do however have to ensure that they don’t accept any unquantifiable risks either. They don’t want to find that the customer they have just underwritten, dies prematurely a short time later. Thus, there are a small number of conditions which will typically be declined. These include the following:
· Any terminal illness diagnosis.
· Any person with multiple risk factors such as obesity combined with smoking and severe heart disease or diabetes.
· Any person who has shown repeated episodes of self-harm.
· Very high levels of alcohol consumption or people who are diagnosed as alcoholics.
· Gross obesity i.e. Body mass index or BMI over 45.
· Where the applicant has a condition that is still under review and no diagnosis has yet been confirmed.
· Travel to perceived dangerous locations e.g. currently Afghanistan and Syria are off limits.
· Extreme sports although most sports are accepted with an additional premium.
There can also be confusing for people if they get a postponement rather than a decline from the relevant life company. Essentially a postponement is an ‘orange rather than red light’ whereby the life company is postponing giving you cover rather than declining you outright. There are a number of reasons for this but typically they occur where an individual may be recovering from a recent illness or has recently got a new condition that may be temporary. It can also be in circumstances where you have recently or shortly will be doing medical tests or similar and the life company will await the results from you before a final underwriting decision is made.
If however, it is an outright ‘red card’ or decline - it is very frustrating, to put it mildly, but it isn’t necessarily the end of the road as there are still some steps you can take to rectify the situation.
1. If you are dealing with the bank or one life insurance company for your mortgage protection cover – move to an experienced broker like Low.ie who deal with all the life companies as we know which companies are better for underwriting certain medical conditions than others.
2. Check with the GP that you deal with as they will have completed the crucial information report that the life company based most of its decision to decline you on. There may be some chance that their information was incorrect.
3. Talk to the bank and ask for a mortgage protection waiver. These are given at the bank’s discretion and normally where there is a second person on the mortgage who can cover the mortgage repayments.
Whatever you do don’t stress as good brokers like us will get you out of this mess!